As European growth expectations come into questions, the broader US stock market (as measured by the S&P 500 depository receipts - SPY) also suggests poor economic times ahead. If you believe the stock market is the ultimate leading indicator of an economy then the performance of the SPY suggests the US has been comfortably within a recession for the six months. Japan is showing negative quarterly growth, Europe seems to be tipping over, and the US is already in a bear market. Looks like tough times ahead for equity investors.
From a stricly short term perspective, markets love to put in lows in the late 3rd quarter. September & October too are generally the worst performing months for equities. Couple the expected seasonal performance with poor economic expectations and add in a little international tension (thanks Russia!) and we have the makings for further price declines for the forseable future.
Technically speaking, one ought to expect a test of the summer lows at or near $120 on the SPY over the coming weeks. Should that level be broken then we must revise our downside targets accordingly.
That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com
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